In battered auto industry, an Alabama carmaker has drive, strategies to succeed

Bernard Troncale/News fileWorkers at the $1.4 billion plant Hyundai plant in Montgomery are averaging four days of production a week, and last month had a couple of five-day workweeks, a spokesman said.

One Alabama automaker has been turning heads all over lately, with a set of strategic moves aimed at promoting its brand despite the current industry downturn.

South Korea's Hyundai, which produces Sonata sedans and Santa Fe sport utilities in Montgomery, has been at the forefront of offering aggressive incentives for new car buyers while also seizing high-profile advertising opportunities as many of its peers bow out.

The plan appears to be working.

For the first three months of the year, Hyundai's U.S. sales were up slightly, by 0.6 percent, over the year-ago period, while other automakers reported steep declines amid the toughest industry conditions in decades.

"I think they see this downturn as a tremendous opportunity to steal market share," said Jessica Caldwell, an auto industry analyst for Edmunds.com. "Really, it's trying to kick your competitors when they're down."

One caveat to Hyundai's success so far this year: The automaker has acknowledged that nearly one-third of its first-quarter sales were to rental fleets, Caldwell said.

"That being said, they did improve from a retail standpoint, and their market share is way up from where it was before," she said.

Hyundai's biggest attention-getter has been an incentives program in which the automaker has pledged to allow buyers to return their vehicles if they lose their jobs. And for a limited time, Hyundai will make payments for customers who find themselves jobless.

General Motors Corp. and Ford Motor Co. have since followed with similar incentives programs, which proved it was a good plan, Caldwell said.

"It was really the first promotion from the automakers that really spoke to consumer confidence," she said, adding that other incentives programs were all about numbers.

And while the plan on its own is probably not selling more vehicles, its combination with other incentives is likely what's driving sales, she said.

Meanwhile, Hyundai has pursued high-dollar advertising spots, such as those during the Super Bowl and the Academy Awards, to hawk its products.

Such venues have long been dominated by domestic automakers GM, Ford and Chrysler. But the Big Three cut back on that spending this year amid severe financial straits that, for GM and Chrysler, required government loans.

Feeling the pinch
Hyundai hasn't been immune to the industry sales slump that has forced automakers around the world to slash output. In Montgomery, at Hyundai's only North American manufacturing plant, production has been suspended on certain days to match lower demand.

Since January, the plant's 3,000 workers have been on a "flexible work schedule," which reportedly has included three-day work weeks.

Now, the $1.4 billion plant is averaging four days of production a week, and last month had a couple of five-day workweeks, plant spokesman Robert Burns said Friday.

As a result, the plant's March output rose to 15,451 vehicles, up from 12,030 in February and 11,000 in January. Burns attributed the higher workload to rising sales of the Sonata, which was the only Alabama-built vehicle to post gains during March.

"We've been very pleased with the sales of the Sonata, and that's what's allowed us to have the four- and five-day workweeks in the last two months," he said.

The plant's future work schedule is dependent on customer demand, Burns said.

Keivan Deravi, an economist at Auburn University Montgomery, said Hyundai's success of late has to be attributed to a combination of factors, not simply one incentive plan or stepped-up advertising alone.

Since last summer, high gas prices have led to changing consumer preferences that linger today. The Sonata is a fuel-efficient sedan and also carries Hyundai's 100,000-mile warranty, two factors that likely are contributing to the sales rise, Deravi said.

And Hyundai's aggressive moves haven't been limited to the current industry downturn, he said. They're just part of a long-term strategy the automaker has taken to plant itself in the minds of U.S. consumers.

"There's no question that they're strengthening their foothold. They have a long way to go, but they appear to be relentless," he said.

Caldwell said Hyundai had to overcome some quality issues when it first entered the U.S. market but the automaker has bounced back and is now moving onto promoting the overall value of its vehicles, which have low price points and lots of content.

The Sonata, for example, has won numerous quality and safety awards. Pricing on the 2009 model starts at $19,395.

"It's just one of those things that takes time," Caldwell said of Hyundai's efforts to become a major player in the U.S. market. "If you keep coming out with good products, you're going to make it."